Mad Hedge Biotech and Healthcare Letter
July 25, 2024
Fiat Lux
Featured Trade:
(REVERSING THE FOG)
(SAVA), (ESALF), (BIIB), (LLY), (RHHBY), (ACIU), (AVXL), (ATHA)
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Close your eyes and think back to your favorite childhood memory. Maybe it's the smell of your grandma's apple pie wafting through the kitchen, or the sound of your grandpa's belly laugh as he tickled you mercilessly.
Now imagine those memories being ripped away, one by one, until all that's left is a hollow shell of the person you once knew and loved.
That's the heartbreaking reality of Alzheimer's disease, and it's a fate that Rick Barry, the newly minted executive chairman of Cassava Sciences (SAVA), is determined to change.
You see, Barry isn't just some suit looking to make a quick buck. No, sir. This man's got skin in the game, and a personal connection to the fight against Alzheimer's that'll tug at your heartstrings.
His decision to join Cassava's board back in June 2021 was driven by a gut-wrenching story about his buddy's father, Buddy. This once-vibrant Navy fighter pilot and commercial airline captain was reduced to a shell of his former self by the cruel hand of Alzheimer's.
And folks, this ain't an isolated case. We're talking about 6.9 million Americans aged 65 and older living with this wretched disease in 2024, with that number set to double in the next 30 years.
Globally, over 55 million people are grappling with dementia, and Alzheimer's is the big, bad culprit in 60-70% of those cases.
While the situation is admittedly grim, Cassava Sciences offers a glimmer of hope: simufilam.
This experimental drug is Cassava's secret weapon, designed to whip a rogue protein called filamin A back into shape.
When filamin A goes off the rails in Alzheimer's patients, it wreaks havoc on brain function. But simufilam, like a disciplined drill sergeant, could get this unruly protein back in line, normalize cellular processes, reduce inflammation, and give synaptic function a much-needed boost.
Now, I know you're probably skeptical, but the Phase 2 trial results were nothing to sneeze at. A whopping 47% of patients saw their cognitive function improve, and the biomarkers of neurodegeneration and inflammation took a nosedive.
But the real moment of truth lies ahead in the Phase 3 trials, RETHINK-ALZ and REFOCUS-ALZ. These trials are the big leagues, with nearly 2,000 participants and top-line results expected by the end of 2024.
If simufilam can prove its mettle, it could be a game-changer for millions of Alzheimer's patients who are desperate for a breakthrough.
Of course, Cassava Sciences isn't the only horse in this race. The heavyweight contenders like Eisai (ESALF), Biogen (BIIB), Eli Lilly (LLY), Roche (RHHBY), and AbbVie (ABBV) are all jockeying for position, while smaller outfits like AC Immune (ACIU), Anavex (AVXL), and Athira Pharma (ATHA) are making some intriguing moves of their own.
But what really sets Cassava apart is the fire in their belly. When Barry says, "If you create great benefit for your patients, you'll create great value for your shareholders," you can tell he means business. This isn't just about lining pockets – it's about making a real difference in people's lives.
And let me tell you, the impact of Alzheimer's is staggering. Over 11 million Americans are providing unpaid care for their loved ones with Alzheimer's or other forms of dementia.
In 2023 alone, these unsung heroes clocked in a mind-boggling 18.4 billion hours of care, valued at a cool $350 billion.
And to make things worse, 70% of these caregivers are stressed to the max trying to coordinate care, while 66% are struggling to find resources and support. On top of that, 74% are also worried sick about their own health.
Financially, Alzheimer's is a beast that just keeps growing. In 2023, it drained $345 billion from the nation's coffers.
Fast forward to 2024, and that price tag is expected to hit $360 billion. And brace yourselves, because by 2050, we could be staring down the barrel of a $1 trillion problem.
So, is Cassava Sciences stock a slam-dunk investment? Well, that depends on your appetite for risk.
In the biotech world, the stakes are high, and the outcomes are never guaranteed. Simufilam's fate rests squarely on the results of those pivotal Phase 3 trials.
But one thing I can say with certainty is that Cassava Sciences has got guts. They're the underdog taking on Alzheimer's, armed with a potentially groundbreaking treatment and a whole lot of heart.
In a world where roughly 1 in 9 people over 65 are living with Alzheimer's, the impact of a successful therapy would be nothing short of seismic.
As investors, it's easy to get caught up in the cold, hard numbers. But sometimes, it pays to step back and consider the human element.
Behind every stock symbol, there are countless families praying for a miracle, tireless researchers burning the midnight oil, and brave souls like Rick Barry putting their money where their mouth is.
So, while I can't tell you to go all-in on Cassava Sciences just yet, I can tell you this: they're fighting the good fight. And in a world that often seems like it's gone completely off the rails, that's something worth getting behind. I suggest you buy the dip.
Mad Hedge Biotech and Healthcare Letter
November 23, 2021
Fiat Lux
Featured Trade:
(ALTERNATIVE ALZHEIMER’S DISEASE STOCKS FOR RISK TAKERS)
(BIIB), (SAVA), (AVXL), (BCRX)
Alzheimer’s disease is one of the most debilitating conditions not only for the patients, but also for their families.
This disease also comes with high costs at $290 billion in annual spending.
More alarmingly, over 6 million people are suffering from Alzheimer’s disease in the United States alone — and this number is expected to keep rising in the coming years.
The growing number of Alzheimer’s patients has resulted in an unmet need in the medical sector.
This demand was estimated to be worth $159 billion to $215 billion in 2010 and is expected to reach $379 billion to $500 billion by 2040.
Considering the burgeoning demand and the lucrative market, it comes as no surprise that several biotechnology and healthcare companies are focusing on coming up with treatments for Alzheimer’s disease.
So far, the most notable names on the list are Biogen (BIIB), Cassava Sciences (SAVA), and Anavex Life Sciences (AVXL).
In terms of market capitalization, Biogen is leaps and bounds away from the two with $37.78 billion. In comparison, Cassava Sciences has $2.13 billion while Anavex has $1.53 billion.
Hence, it’s incredibly tempting to simply declare Biogen as the runaway frontrunner in this contest.
The fact that the company’s Alzheimer’s disease treatment, Aduhelm, received an FDA approval obviously pushes it further ahead as well.
Meanwhile, its closest competitor Cassava Sciences’ Simufilam has yet to commence with its Phase 3 clinical trial.
However, it’s too soon to discount the competition.
Aside from Cassava Sciences’ work on an Alzheimer’s disease treatment, this smaller biotechnology company is also working on another potential blockbuster product that goes hand in hand with Simufilam: SavaDx.
Basically, SavaDx is developed as a blood-based diagnostic test targeting Alzheimer’s disease.
The goal of this product is pretty straightforward: to detect the disease long before its symptoms manifest.
This is a remarkable idea since it could offer potential patients the opportunity to aggressively seek treatment early on when the odds of achieving a successful intervention against Alzheimer’s disease are at their peak.
Long term, SavaDx could be instrumental in segmenting the patient population, which means medical professionals can develop more target-specific treatments to address the needs of every subpopulation more effectively.
Apart from Cassava Sciences, the emergence of Anavex Life Sciences in the neurological disorder space has been embraced by investors as well.
Anavex’s candidate, ANAVEX 2-73, doesn’t concentrate solely on Alzheimer’s disease.
It’s also developed as a potential treatment for Rett syndrome and Parkinson’s Disease Dementia (PDD).
While ANAVEX 2-73 has yet to gain regulatory approval, the positive results from the trials have boosted the company’s share price by 4-fold since 2020.
Considering the slowly crowding space of Alzheimer’s disease, Anavex’s move to pursue Rett Syndrome is an excellent strategy.
Rett Syndrome is a severe neurological condition that typically affects girls. Most cases are triggered by a gene mutation necessary for the development of brain nerves.
Thus far, the FDA has granted ANAVEX 2-73 with the fast track and orphan drug designation, particularly for its Rett Syndrome indication.
In terms of the market opportunity for Rett Syndrome, ANAVEX 2-73 could rake in $1 billion annually for this indication alone.
At the moment, there are roughly 11,000 Rett Syndrome patients in the US.
Given its status, ANAVEX 2-73’s pricing is expected to follow the same trend as the other rare disease drugs, like BioCryst Pharmaceuticals’ (BCRX) angioedema treatment Orladeyo which is priced at roughly $495,000 annually.
This puts ANAVEX 2-73 in the $500,000 range each year.
Overall, both Cassava Sciences and Anavex offer compelling cases that make them attractive alternatives for speculative investors looking elsewhere for an Alzheimer’s disease stock.
Meanwhile, buy-and-hold investors might still find Biogen more appealing long term because it has a more diverse pipeline and an approved (albeit controversial) product in Aduhelm.
Mad Hedge Biotech & Healthcare Letter
March 2, 2021
Fiat Lux
FEATURED TRADE:
(ANOTHER PLAYER JOINS THE ALZHEIMER’S DISEASE DRUG RACE)
(SAVA), (PFE), (HLUYY), (LLY), (AVXL), (CRTX), (BIIB), (GILD)
Over 5.8 million people in the United States live with Alzheimer’s disease, and there are at least 487,000 new cases recorded every year.
Sadly, there has been no new treatment approved for this condition since 2003.
It isn’t for the lack of trying though.
In fact, large-cap biotechnology companies like Pfizer (PFE), H Lundbeck A/S (HLUYY), and Eli Lilly (LLY) have tried their hands at coming up with a drug to treat Alzheimer’s disease.
Unfortunately, none of them succeeded.
Amid the failure of these industry giants to develop a cure, a small-cap biotechnology company based in Austin, Texas has emerged with a potential answer to the problem.
Cassava Sciences (SAVA), which has a market capitalization of $2 billion, is offering investors a different direction—and its efforts haven’t gone unnoticed.
Over the past 12 months, Cassava stock rose by a whopping 668%.
The overwhelming interest in the stock is understandable.
In February, Cassava released promising reports about its own Alzheimer’s drug candidate, Simufilam.
Patients who took Simufilam for six months showed 10% improvement on their cognition tests, while their dementia-related behavior improved by 29%.
The next stage would be for Cassava to go through Phase 3 of the study for Simufilam.
Interestingly, the success of Simufilam’s trials has not only benefited Cassava but also several smaller biotechnology companies working on Alzheimer’s disease treatments.
Specifically, Anavex Life Sciences (AVXL), which only has a market capitalization of almost $900 million, gained an impressive 129.4% boost.
Meanwhile, Cortexyme (CRTX), which has a market capitalization of $1.07 billion, rose by 57.8% this year following the positive data release.
While Cassava’s results are definitely worth looking into, it’s critical to understand the limits of the data the company has provided the public thus far.
My caution against Cassava at this point is not based on the belief that its Alzheimer’s disease program will fail.
Rather, I’m wary of the stock because its value right now is heavily based on the misunderstood perception that Simufilam has already succeeded.
Looking at the current data from the company, I believe that the skyrocketing price at this point remains unjustified.
It’s important to keep in mind that the FDA will not grant approval to a drug unless it shows satisfactory effectiveness in Phase 3 clinical trial.
A fairly recent example of a cautionary tale is the fanfare generated by Biogen (BIIB) when it released promising data for its own Alzheimer’s drug, Aducanumab.
However, this isn’t to say that Simufilam won’t make it, or that it will experience the same issues faced by Biogen.
This simply means that valuing this stock requires a more sober assessment. It’s challenging to determine its actual value right now with all the speculative fever surrounding it.
Remember, clinical trials for Alzheimer’s disease would set a company back roughly $1.8 billion on average.
It also typically takes more than four years to complete. At this point, Cassava only has approximately $94.3 million in cash.
This means it would need to either land a development partner to help shoulder the expenses or sell additional stock to come up with additional funds.
The Alzheimer’s drug market is massive, which is a clear indicator of the dire need in this space because there remain no reliable drugs available.
On the low end of the estimate, the global Alzheimer’s drug sales is projected to be $3.5 billion back in 2018.
On the high end, the number could reach $4.9 billion in 2013 to over $13.3 billion by 2023.
What are the prospects of an effective Alzheimer’s disease drug? Let’s go back to Biogen.
Its Aducanumab, which never managed to release impressive data, still estimated peak sales of roughly $4.2 billion.
Back of the envelope math says that an approved, safe, and effective treatment would undoubtedly generate blockbuster multi-billion dollar sales.
After all, large-cap companies pay a premium for exclusive rights to promising drugs.
To use an approved exclusive drug as an example, let’s take a look at the September 2020 deal between Immunomedics and Gilead Sciences (GILD).
Prior to the deal, Immunomedics developed an exclusive and promising chemotherapy drug called Trodelvy.
Like Aducanumab, that treatment was valued to rake in $4 to $5 billion in peak sales.
Seeing the potential, Gilead Sciences bought out Immunomedics to get Trodelvy.
The deal? It was worth $21 billion, or approximately 100x where Cassava trades when 2021 started.
Although it’s difficult to determine how much Cassava would eventually be valued, the sales for its Alzheimer’s drug should project better numbers than the regularly doubted Aducanumab.
The bottomline is this: Cassava is a promising stock that offers an Alzheimer’s disease drug candidate that reported better results than what the big players in the industry achieved so far.
Investors should expect volatility from this company in the next few months or even years as it enters a crucial stage: the Phase 3 trials, otherwise known as the drug development graveyard.
